Solving Nonlinear Stochastic Growth Models: A Comparison of Alternative Solution Methods

John B. Taylor, Harald Uhlig

NBER Working Paper No. 3117 (Also Reprint No. r1447)*
Issued in September 1990
NBER Program(s):   EFG

---- Abstract -----

The purpose of this paper is to report on a comparison of several alternative numerical

solution techniques for nonlinear rational expectations models. The comparison was made by

asking individual researchers to apply their different solution techniques to a simple

representative agent, optimal, stochastic growth model. Decision rules as well as simulated

time series are compared. The differences among the methods turned ou t to be quite

substantial for certain aspects of the growth model. Therefore, researchers might want to be

careful not to rely blindly on the results of any chosen numerical solution method in applied

work.

*Published: Journal of Business & Economic Statistics, Vol. 8, No. 1, pp. 1-17, (January 1990).

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